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Expansion game

Project development in the Gulf has transformed no other support industry like pipe manufacturing, finds out O&G ME.

Yasseen Jaffer, CEO, Proclad Group.

By Daniel Canty

Fri 18 Sep 2009 04:00 AM

Project development in the Gulf has transformed no other support industry like pipe manufacturing. As fabrication migrates to a local base, the frontrunners are bringing on-stream a tidal wave of regional production facilities.

Regional demand for pipes and piping solutions has seen explosive growth in the last five years. With key projects pushing ahead in the oil and gas business, and buoyed by the exponential growth in demand for municipal and utilities based projects around the Gulf, the best and brightest pipe suppliers have shifted their manufacturing bases to the Middle East.

Every oil and gas support industry in recent years has grown a presence in the region, but few extend much beyond a bigger sales office, or an after-sales maintenance division. Pipe manufacturers on the other hand have forecast the medium-term demand, and taken the initiative by bringing even more production to the booming industrial estates scattered on the peripheries of the core oil and gas centres.

With it's business-friendly reputation and solid logistical links with the rest of the Gulf the UAE has seen a massive upswing in recent years, with several major facilities for both steel and advanced glass-reinforced plastic piping facilities opening before year-end. However, Saudi Arabia has long demanded a local presence for real success, and Qatar is flinging open its doors like never before.

Oil & Gas Middle Eastmet the region's most successful and most ambitious pipe companies, all of which are honing their sights on the upstream business in 2009.

Proclad Group, an industry veteran of over 40 years, has its roots in the UK North Sea business, but has a strong local presence. As a manufacturer of internally clad pipeline pipes, fittings, flanges, vessels and well-head components, the company has found serving the Middle East upstream market from its UAE hub a good fit, but the Saudi market is calling.

"We will be opening two facilities in Dubai's TechnoPark by the end of summer, increasing our capacity to around 700,000 tonnes of pipes per year," explains Yaseen Jaffer, CEO of Proclad. "This will be complete design, manufacture and installation of pipes and flanges. Our existing facilities in Singapore, the UK and Abu Dhabi will remain open for business. Hopefully our next step will be opening manufacturing facilities in Saudi Arabia or Brazil after TechnoPark."

Jaffer adds that the Saudi Arabian operations may even open this year, and is expected to be in Dammam's Second Industrial Area, with the Brazilian job following on in 2010. "The big site in Dubai is mainly expected to supply UAE, Oman Qatar and Kuwait. We have been serving the Saudi market from Abu Dhabi for the past 10 years, and the mechanically clad pipes for Saudi will still come from here.

The design and consultancy work will still come from the UAE, but in KSA we need to have a presence because it is the largest market, and they have a very clear plan for the next ten years with regards to their upstream development, so we want to be present there."

Despite the aftershock that rippled through the industry following the crude price collapse in 2008, Jaffer remains upbeat, and impressed with upstream business momentum in the Gulf. "The oil and gas business has not significantly changed this year.

If you look at Abu Dhabi there is around $20 billion worth of projects ongoing there. There will be more projects going ahead in the coming 4-5 years, and Saudi Arabia seems to have the same momentum."

One thing that has changed is client priorities. In the early years of the millennium, the regional focus was all about lead times, and securing project-ready piping in a timely fashion. The focus this year is very much cost-control based.

"Clients have been very smart in negotiating their deals. From October last year these was a pause until May this year. But since May the market has stabilised and the picture is clear that the clients have taken advantage of the lower commodity prices, and now things are moving ahead. I think clients have been quite aggressive with negotiating their position, but who wouldn't do the same in their seat?"

Future Pipe's $900 million target

Dubai based Future Pipe Industries Group (FPI), a global manufacturer of large-diameter fiberglass pipe systems, has announced that it has won projects worth over US$135 million in the first half of 2009 alone, primarily from non-core markets including Iraq, Libya and Syria.

The group's sales target for 2009 is set at $900 million, an 8% increase on last year's results, and the company is on course to reach this target, despite the global economic downturn.

The projects that have been won are for applications in a wide variety of industries including oil and gas, infrastructure and municipal works. Headquartered in Dubai, FPI's operations include 10 factories in the UAE, Oman, Qatar, Lebanon, Egypt, The Netherlands and the USA.

"We anticipate our growth to continue this year despite the global economic downturn albeit not at the same rate as we have seen the business grow over the last few years," explains Rami Makhzoumi, president and CEO of Future Pipe Industries Group. "We will not be opening new manufacturing facilities this year. However, we will be expanding the capacity in our existing factories through the addition of new machines."

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Perma-Pipe can design and supply a complete system that includes the engineering, material, and preinsualted pipe system for any application. We can also design a system for existing pipe systems. We have supplied this system for resins, fuel oil, paint lines, sulphur, benzene, styrene gas, praxylene, chemicals and acids. Perma-Pipe's UAE base is located in Fujairah.

Plastic fantastic

The drive to bring production closer to consumers has not only caught on with the base metal pipe manufacturers. Recently Hedley International Emirates Contracting, a specialist in glass reinforced plastic (GRP) piping solutions has seen an upswing in demand from upstream oil and gas companies. Building on a rich pedigree of municipal and utilities infrastructure works across the region, the chairman and CEO, Mohammed Al Refaey, says 2009's business strategy is focused on building its oil and gas customer base.

"Increasingly customers are moving from steel pipes to GRB and GRE pipes because they are locally manufactured. GRE has strong anti-corrosive qualities which appeals to the oil and gas industry, and its lighter, and can last longer - up to 60 years in some applications," says Refaey.

The critical applications which have seen the quickest take-up in regional energy projects have been water-handling applications, but Rafaey expects to see more business in gas and crude handling. "We have done projects with ADCO and ADGAS recently in Habshan oilfield and Ruwais in Abu Dhabi.

The pipes are mostly used for water injection and infrastructure pipes, and desalination operations and outflow." Other areas which GRP is particularly suited to include offshore applications, thanks to its weight advantage, and fire fighting infrastructure, where shorter installation times are attractive.